Summary

Tether (USDT) is one of the most popular stablecoins. It maintains a one-to-one value ratio to the U.S. dollar. Tether is active on many different blockchains. Over the past few years, its trading volume has continued to increase and its liquidity has improved significantly.

Like other stablecoins, USDT is beneficial to digital currency trading and helps traders stay away from the market for Bitcoin and other digital currency assets. fluctuation. Using stablecoins can also eliminate the additional costs and delays associated with converting digital currencies into fiat currencies.

Introduction

Tether is an important part of the cryptocurrency ecosystem. As of December 2020, Tether ranks as the fourth largest cryptocurrency in the world, with a market capitalization of nearly $20 billion, second only to Bitcoin, Ethereum and Ripple (XRP). In addition, it regularly surpasses Bitcoin to top the list of daily trading volumes. So, what exactly is Tether, and how can you use it effectively?

What is Tether (USDT)?

Tether (USDT) is the world's first stable currency (a digital currency benchmarked against the value of legal currency). It was originally launched in 2014 as "Realcoin" by Bitcoin investor Brock Pierce, entrepreneur Reeve Collins and software developer Craig Sellers.

At first, USDT was issued in the Bitcoin protocol through the Omni layer, and was later migrated to other blockchains. In fact, as the chart below shows, the majority of its supply is stored on Ethereum in the form of ERC-20 tokens. USDT is also issued on several other blockchains, including TRON, EOS, Algorand, Solana, and OMG Network.

Tether has also experienced success and controversy. Especially in the early stages, the price of USDT continued to fluctuate, even reaching $1.2 at some points in time. However, the stablecoin’s volatility has dropped significantly since the beginning of 2019. The reason for this may be attributed to the steady increase in trading volume and the overall development of the cryptocurrency market.

How does Tether (USDT) work?

Compared with more traditional digital currency assets, the effectiveness of stablecoins is reflected in their relative stability. As a stable currency, the advantage of Tether is that it is bound (also called "pegged") to legal currency. It is said that USDT was initially fully pegged to the U.S. dollar, with each USDT in circulation representing 1 U.S. dollar.

According to the original white paper of Tether:

All Tether coins are pegged to the corresponding fiat currency at a ratio of 1:1, and are fully supported by the reserves of Tether coins. The reserve value of Tether is announced daily and updated at least once a day.

Although Tether was initially anchored to U.S. dollar assets at a 1:1 ratio, Tether has evolved to be able to other cash equivalents, assets and loan receivables as collateral.

As the USDT/USD chart below shows, this stablecoin (usually) trades at a stable 1:1 rate against the U.S. dollar Trading. However, major market events may have an impact on prices.

Why Tether (USDT) is important

TEDA Coins bridge the gap between digital currencies and fiat currencies. With Tether, investors can easily trade U.S. dollars at a 1:1 exchange rate, avoiding the inherent volatility of other digital currencies.

With this stability, investors can hold a digital asset similar to legal tender and easily trade in the digital currency market Trade other coins. Despite the same risks, Tether’s key features make it a highly favored coin.

Key Features

• 1:1 exchange (USD to USDT)

• Stable (consistent with the stability of the US dollar)

• Can be used on different blockchains

• Use cases are different from traditional digital currencies

Use cases of Tether (USDT)

Gain market stability quickly

If Bitcoin or other digital currency assets decline rapidly, Instead of withdrawing cash, you can quickly exchange it for USDT.

Easily transfer funds between trading platforms

Using Tether, funds can be transferred between trading platforms quickly and easily. This also facilitates arbitrage trading using other coins.

Trade on a trading platform that only supports digital currencies

Some trading platforms do not provide legal currency deposit and withdrawal services, but support USDT transactions. Once you have Tether, you can trade on these exchanges without worrying about the market volatility that comes with investing your primary trading capital in Bitcoin (or other digital currencies).

Foreign exchange trading

USDT is pegged to the U.S. dollar. When local (non-U.S.) currencies have a higher value against the U.S. dollar, foreign exchange-style transactions can be carried out to exchange them for USDT. The USDT is then exchanged for cash or other assets when the local currency depreciates.

How to store Tether (USDT)

In addition to Binance and other cryptocurrency trading platforms, USDT can also be stored through various cryptocurrency wallets. These include web and mobile wallets (such as Trust Wallet), cold storage hardware wallets (such as Ledger) and third-party software wallets. Since USDT is issued on a series of different blockchains, you need to make sure you are transferring within the same network.

For example, if you go to the Binance USDT withdrawal page, you can see five different transfer network options: BNB Beacon Chain (BEP2), BNB Smart Chain (BEP20), Ethereum (ERC20), Tether (OMNI) and Tron (TRC20). Please be careful when choosing a network. Once you use the wrong network, you can lose all your funds. For example, if you send Omni USDT to an ERC-20 USDT address, the funds will most likely disappear.

Please note that as of December 2020, ERC-20 USDT is the only type supported by Ledger. Therefore, USDT in the Bitcoin blockchain (Omni layer) cannot be transferred to a Ledger hardware wallet.

Other Tether

In addition to USDT, Tether also includes other stable coins:

• EURT: Tether pegged to the euro

• CNHT: With RMB-linked Tether

• XAUT:Tether linked to physical gold

Visit the Tether transparency page to view the circulation of each token in each blockchain.

Summary

Stablecoins reduce the frequency of traders exchanging between fiat currencies and cryptocurrencies, bringing many conveniences to the cryptocurrency trading field. Therefore, USDT is a convenient asset that is beneficial for cryptocurrency trading.

While there are various doubts about the effectiveness of the reserve, the trading volume over the past few years proves that people believe in Tether Value as a stablecoin. In addition to USDT, you can also choose to use other stablecoins (such as BUSD, USDC, TUSD, and PAX).